The Singapore-France Double Tax Treaty

France’s ports Marseille and Le Havre rank among the top ten European ports while the Paris Charles de Gaulle Airport is the largest cargo hub and second largest passenger airport in Europe. The country boasts extensive road and rail network in the region and its high-speed rail lines are ranked second in Europe. The world-class logistics infrastructure of France provides extensive linkage with the rest of Europe and an undeniable edge for exporters operating from France. The French economy is making solid progress towards a recovery aided by the healing Eurozone and strengthening demand from the UK and the US.

Singapore-France Economic Relationship

France is Singapore’s second largest trading partner in the EU and Singapore is the largest trading partner for France in ASEAN. Singapore has the highest concentration of French companies in the region and some of the big names, such as Michelin, Renault and Rémy Cointreau International, have based their regional headquarters in Singapore. Singapore is also the second leading recipient of French investments in the region after Japan.

When the EU-Singapore FTA is ratified, the mutual economic engagements between the two countries are set to grow. Both Singapore and its European counterpart possess the strategic merits to serve as a springboard into the respective regions, providing a strong leverage for investors and enterprises targeting the markets. The Avoidance of Double Tax Treaty provides significant tax benefits in the form of foreign tax credits and competitive withholding tax rates. The following is an overview of Singapore -France DTA.

Singapore-France DTA

The DTA between the government of Singapore and France was first concluded on 9 September 1974 and went into force on 1 August 1975. In 2016, it was revised again and the revised DTA went into force on 1 June 2016 with an effective date of 1 January 2017.

An overview

Tabulated below is an at-a-glance summary of the key features of the Singapore-France DTA.

Overview

Nature of Income	Normal Withholding Tax France	Normal Withholding Tax Singapore	Treaty Rate
Dividends	30%	Nil	5% or 15%
Interest	0%	15%	10%
Royalties	33.33%	10%	10% or 33.33%

Scope of Application

The provisions of the DTA apply to persons who are residents of one or both of the Contracting States. “Person” includes an individual, a company and any other body of persons, which is treated as an entity for tax purposes. The provisions of the DTA shall be applicable to all taxes imposed on income on behalf of a Contracting State. The provision covers all taxes imposed on total income or on elements of income including taxes on gains from the alienation of movable or immovable property, taxes on the total amount of wages or salaries

In the case of France, the provisions shall apply to the income tax and corporation tax, and shall cover withholding tax or prepayments related to income and corporation tax. In the case of Singapore, the agreement covers income tax.

Residency

The term “a resident of a Contracting State” means any person who is liable to pay tax in a contracting state by reason of his domicile, residence, place of head or main office, place of control and management, or other similar criterion.

In the case of an individual, who is a resident of both countries, his tax residency shall be determined by the location of his permanent home, but if permanent home is in both countries or in neither of them, then the center of vital interest shall be taken into account. When both permanent home or vital interest factors fail to determine the residency, then habitual abode will be considered; and if the individual does not have habitual abode in both the countries, then the nationality will be taken into consideration; and where the individual is a national of both countries or neither of them, then the contracting states shall determine the residency through mutual agreement.

If the person, other than an individual, is a resident of both the contracting states then the competent authorities of the contracting States shall determine the residency through mutual agreement by taking into consideration all relevant factors.

Permanent Establishment

“Permanent establishment” (PE) means a fixed place of business through which the business of an enterprise is wholly or partly carried on. PE includes office, factory, workshop, farm, plantations, installations such as drilling rig, places of extraction of natural resource such as mines, quarry, oil wells, etc. Building site or construction, assembly or installation project constitutes a permanent establishment only if it lasts more than six months.

Supervisory activities by an enterprise of a contracting state carried on in the other State for more than 6 months in connection with a building site or a construction, installation or assembly project, which is being undertaken in that other State will constitute a PE.

Storage facilities held for certain purposes, such as storage of goods for the purpose of display, delivery, processing, etc., would not amount to a PE. Likewise, maintenance of a fixed place solely for the purpose of carrying on activities that are of a preparatory or auxiliary in character will also not amount to PE.

Engagement of a broker, general commission agent or any other agent of an independent status for carrying out business in one of the contracting state will not amount to a PE. If the activities of such an agent are devoted wholly or almost wholly on behalf of the enterprise, or is acting on behalf of an enterprise and habitually exercises an authority to conclude contracts, secure orders, or maintains and delivers stock of goods or merchandise on behalf of the enterprise in a contracting state, then the agent is deemed to be a PE. However, if the activities carried out by the agent are auxiliary in nature, it will not amount to a PE.

A resident company of a contracting state controlled or being controlled by a resident company of other contracting state shall not by itself amount either company a PE of the other.

Important Provisions

Tax on Dividends

Dividends paid by a resident company of a Contracting State to a resident of the other Contracting State may be taxed in that other State. However, it may be subjected to tax in the Contracting State of which the company paying the dividends is a resident. But the tax so charged shall not exceed:

• 10% of the gross amount of the dividends if the recipient is a company which owns directly at least 10% of the capital of the company paying the dividends;
• 15% of the gross amount of the dividends in all other cases.

This provision shall not apply if the recipient has a PE in the contracting state of which the company paying the dividends is a resident and such dividend received is effectively connected to that PE. Such income from dividends connected to a PE will be treated as a Business Profit and subjected to tax treatment accordingly. The DTA also provides that such profits may be subjected therein to any withholding tax provided by the laws of that other Contracting State but such tax shall not exceed 15% of one-third of the profits of the PE after payment of the corporation tax on such profits.

Tax on Interest

Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. However, such interest may also be taxed in the Contracting State in which it arises if the recipient is the beneficial owner of the interest. The tax so charged shall not exceed 10% of the gross amount.

The Government of a Contracting State and specified Government bodies shall be exempt from tax in the other Contracting State with respect to interest derived from that other State.

Interest arising in a Contracting State on loans and debentures made to an enterprise engaged in industrial undertaking in that state to a resident of other contracting state is exempt from tax of that first-mentioned Contracting State. Such enterprises shall be approved by the competent authority and industrial undertaking shall include manufacturing, assembling, processing, construction & civil engineering, ship-building, breaking & docking, energy & water supply, mining & mineral works, plantation, agriculture, fishery & forestry, and others declared as industrial undertaking.

The above provisions shall not be applicable if the beneficial owner of the interest has a PE or fixed base in the contracting state in which the payer is resident and the interest paid is effectively connected with such PE or fixed base. Likewise, if interest arises in the contracting state where the payer is resident, the provisions shall not be applicable. However, if the payer has a PE in the other contracting state in which the beneficial owner is resident and the interest is paid in connection with an indebtedness related to that PE, then the interest is said to arise in the other contracting state.

If the interest paid is in excess of the amount that would have otherwise been paid, then the provision of the treaty shall apply only to that amount and any excess amount of interest paid will be taxable according to the laws of each Contracting State.

It must be noted that in the absence of the DTA, foreigners receiving interest from Singapore residents will be subjected to 15% withholding tax.  But France does not levy a withholding tax on interest paid to non-residents.

Tax on Royalties

Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. Royalties encompass payments of any kind received as a consideration for the use of, or the right to use, any copyright patent, trade mark, design or model, plan or artistic, literary or scientific work including cinematograph films and tapes for television or broadcasting, etc. Royalties shall be deemed to arise in a Contracting State where such property as referred above is used.

However, royalties paid for the use of, or the right to use, a copyright of a literary or artistic work, including cinematograph films and films and television or radio tapes or for information related to a commercial experience, may also be taxed in the Contracting State in which they arise and according to the laws of that State.

If, due to the special relationship existing between the payer and the recipient, the royalties paid is in excess of the amount that would have otherwise been paid, then the provision of the treaty shall apply only to that amount and any excess amount of royalty will be taxable according to the laws of each Contracting State.

The provisions shall not be applicable if the recipient of the royalty has a PE or fixed base in the contracting state in which the payer is resident and the royalty paid is effectively connected with such PE or fixed base.

Tax on Capital Gains

Gains from the alienation of immovable property may be taxed in the Contracting State in which such property is situated. Gains derived by a resident of a contracting state from the alienation of movable property connected to a PE or a fixed base located in the other contracting State may be taxed in the other state. Gains derived from the alienation of such PE or the fixed base itself may also be taxed in the other state.

Gains derived by a resident of a Contacting State from the alienation of ships or aircraft operated in international traffic by an enterprise of that Contracting State or movable property pertaining to the operation of such ships or aircraft are taxable only in that Contracting State.

Gains from the alienation of any property or assets, not covered under this provision shall be taxable only in the State of which the alienator is a resident. However if such property is used in the other contracting state then the gains may be taxed in the other state.

Gains from the sale or exchange of shares or comparable interests in a real property co-operative or a company whose principal assets are comprised of real property then the gains may be taxed in the Contracting State where such property is situated.

Singapore does not tax capital gains. In France capital gains are treated as ordinary income and taxed accordingly for corporate income tax purposes.

Treatment of Business Profits

The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a PE situated therein. But only that portion of the profit that can be effectively attributable to the PE can be taxed in the other Contracting State.

For the purpose of determining the profits of the PE, it shall be allowed all expenses and deductions that could be reasonably attributable to the PE, and deductible if the PE were an independent enterprise; and profits of the PE shall be determined as if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a PE.

A PE’s mere purchase of goods or merchandise for the enterprise shall not render profits attributable to that PE.

Treatment of Associated Enterprises

If an enterprise or persons involved in an enterprise of a Contracting State participate directly or indirectly in the management, control or capital of an enterprise of the other Contracting State the enterprises involved are said to be associated enterprises.

The terms and conditions of operations and transactions between the associated enterprises will differ from those made between independent enterprises, thus affecting the profitability and income of the enterprises.

In the case of associate enterprises, the DTA provides that the contracting states may deem a taxable income that would have otherwise accrued if the parties were independent and tax the enterprises accordingly.

Any profits that would have accrued to the enterprise if not for the associated enterprise condition shall be included in the profits of the enterprise and the tax shall be charged on those profits.

Treatment of Income from Shipping & Air Transport

Profits derived by an enterprise of a Contracting State from the operation of ships and aircraft in international traffic shall be taxable only in that Contracting State.

The provisions applies to the share of the income from the operation of ships or aircraft derived by an enterprise of a Contracting State through participation in a pool, a joint business or an international operating agency.

Treatment of Income from Property

Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State. Income from immovable property of an enterprise and income from immovable property used for the performance of independent personal services shall also be covered by this provision.

Income from direct use, letting or use in any other form of immovable property shall be covered by the agreement. The term “immovable property” shall comprise of properties as defined by the law of the contracting state in which the property is located. It shall include rights to variable or fixed payments as consideration for rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits and sources of natural resources.

Treatment of Personal Income

Salaries & Wages

Salaries, wages and other similar remuneration derived by a resident of a State for employment shall be taxable only in that State, unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration may be taxed in that other State. However, even if the employment is exercised in the other Contracting State, the recipient shall only be subjected to tax in the first mentioned state in the following circumstances:

• the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and
• the remuneration is paid by, or on behalf of, an employer who is a resident of the first-mentioned State; and
• the remuneration is not borne by a PE which the employer has in the other State

Director’s Fees

Directors’ fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

Artists & Sportspersons

Income derived by a resident of a State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other State, may be taxed in that other State. However, this provision shall not apply if such incomes are accrued for such activities exercised in a contracting state and substantially supported by public funds of the Government, a political subdivision, a local authority or a statutory body of that Contracting State.

Pensions

Any pension or any annuity derived by an individual, who is a resident of a Contracting State, from the other Contracting State shall be taxable only in the first-mentioned Contracting State.

Teachers, Professors and Researchers

An individual, who is a resident of a Contracting State immediately before making a visit to the other Contracting State, on invitation visits that other Contracting State for a period not exceeding two years solely for the purpose of teaching or research or both at any university, college, school or other similar educational institution, which exists primarily for research purposes or other similar public institution, in that other Contracting State shall be exempt from tax in that other Contracting State on his remuneration for such teaching or research.

Students & Trainees

Students and trainees who were a resident of a Contracting State immediately before visiting the other contracting state, where he is temporarily present as a student at a recognized university or similar institutions, or as a recipient of grant, award or allowance from government, charitable, religious or other similar organizations or as a business apprentice shall be exempt from tax in the other state on all remittances and grants received from abroad and any remuneration in respect of services in that other State, provided the services are performed for the purposes supplementing his resources available for his maintenance.

Likewise, an individual who is a resident of a Contracting State immediately before visiting the other Contracting State, where he is temporarily present for a period not exceeding three years, or the purpose of study, research or training solely as a recipient of a grant, allowance or award from a scientific, educational, religious and charitable organization or under a technical assistance program entered into by one of the Contracting States shall be exempt from tax on remunerations and grants and allowances in the other State.

Likewise, a resident of a Contracting State before visiting the other contracting state for a period not exceeding not exceeding twelve months solely as an employee of, or under contract with, the second-mentioned Contracting State or an enterprise thereof for the purpose of acquiring technical, professional or business experience, shall be exempt from tax of the other Contracting State on remuneration and remittances received.

Elimination of Double Taxation

The DTA provides relief from double taxation where income is subject to tax in both Contracting States.

In the case of Singapore resident, French tax payable in respect of income derived from France shall be allowed as a credit against the Singapore tax payable in respect income derived from France, but the credit shall not exceed that part of the Singapore tax chargeable, as computed before the credit is given. In case of dividend income paid by a French company to a Singapore resident, directly or indirectly owning a 10% share in the dividend paying French company, Singapore shall take into account French corporate tax payable by that company in respect of its income out of which the dividend is paid, but the credit shall not exceed that part of the Singapore tax chargeable, as computed before the credit is given.

In case of France residents, Singapore sourced incomes other than dividends, royalties, interests, director’s fees and earnings of artists, athletes and entertainers are exempt from French tax. Howeverc France retains the right to take into consideration the items of income thus included while determining the tax rate of the resident.

Credit is allowed against French tax chargeable against Singapore tax payable on dividends, interest, royalties, director fee and incomes of artists and athletes.  In case of dividends, the recipient French resident must have at least 10% share in the dividend paying Singapore Company to qualify for credit.

Conclusion

When the EU-Singapore FTA is ratified and ASEAN Community materializes, the trade and investments is set to accelerate. France and Singapore both having the infrastructure and the strategic location and linkage will prove to be vital links in the respective unified markets. The DTA between the two countries will further catalyze transactions of the investment and trading communities.

For more details on the specific provisions covered under the tax treaty between Singapore and France, please refer to IRAS Website.

For general information on Singapore DTAs, refer to

Singapore Double Taxation Agreements (DTA) Guide.